Forex, also known as foreign exchange, FX or currency trading, has emerged as a viable venture for making money online for many Kenyans in recent years, Nevertheless, foreign exchange remains complex and quite the headscratcher for many more Kenyans.
A seasoned forex trader and a trainer who have experienced the highs and lows of the trade spoke to myNetwork and shared tips on how to make money in forex, how to avoid losses, and why training is necessary before investing in this highly-risky business.
Gilbert Kimari, Head of Training, Nairobi School of Forex
Gilbert’s journey in forex trading began in 2007 when he was still in college.
Twelve years later, Gilbert is not only an accomplished forex trader, but a forex trainer too.
How did you become a forex trainer?
After I established myself in the trade, people around me started asking me to teach them how forex works; and I would do it for free.
Afterwards, my friends (also experienced forex traders) and I designed a course on online forex trading. We hoped to train those interested on how the industry operates. This is how Nairobi School of Forex came into being in 2018.
What is covered in this course and how long does it take?
The course covers market analysis, risk management, planning and strategy development, as well as understanding the international forex market.
It also covers trading on major stock market indices and precious metals too. The course is open for all, lasts two months, and costs Sh50,000.
Why is it important for a trader to undergo training before investing in FX?
Before you start any business, you must understand what it entails. The same applies to online forex trading.
Leveraged investments such as forex trading carry a higher risk than other types of investments.
It is therefore necessary to understand these risk so that you can manage your capital well and achieve consistent returns.
Training gives prospective traders a strong foothold when getting into this business.
The forex landscape in Kenya has been unregulated for many years. How is it like to operate in such an industry?
The forex market is a banking network where the banks are interconnected for the purpose of buying and selling currencies on behalf of their clients.
Foreign exchange and its trade is therefore regulated by the Central Bank of Kenya. The CBK regulates the flow of money within Kenya.
Online forex trading, which involves speculating on future currency price movements using derivative contracts, had remained largely unregulated in the country until 2017 when the CMA created a legal framework for companies that wanted to offer forex brokering services and fund managing services.
This allowed such companies to set up shop in Kenya and operate in a regulated environment.
In what significant ways has the entry of CMA influenced trading?
Online forex trading laws gave CMA the power to regulate and ensure compliance by all companies offering forex brokering and fund management services.
As a result, the public is now protected from exploitation by rogue forex trading schemes which were prevalent before the regulations came into effect.
Under these regulations, the market has improved because traders can now engage locally registered forex brokers instead of relying on forex brokers who are licensed in foreign countries. The laws have encouraged more people to invest in forex.
What is the future like for forex traders?
It is brighter. The CMA plans to open up the country to innovations in the financial sector so as to help the country realise its objective of being a major international financial hub.
Erastus Kago, a trader
Erastus started trading as an amateur in 2014 before turning professional in 2016.
What does one need to get started as a trader?
First, you need to open a forex broker account. This account has to be authenticated before any trading can take place.
You are also required to submit your identification documents, a utility bill, a bank statement, and proof of residence to ascertain your identity.
What valuable lessons have you learned since you started trading?
To trade profitably, you must be sober, and good at managing your emotions. You have to make decisions based on logic.
Avoid trading when you are exhausted or stressed. Also, don’t “over trade”, that is, don’t take overly unreasonable risks.
Would you say training improves one’s competence?
Yes, it does. There is a lot of free information about this subject online, so most traders are self-taught.
But when you engage a professional, you are likely to succeed. Through training and research, you are able to discover the trading options that suit you.
However, before you enlist the services of an expert, it is important to scrutinise their track record.
Be wary of people who call themselves trainers but don’t have any trading history. The best way to understand an industry is to be actively involved in its operations.
Is forex similar to gambling?
The only similarities between the two is that none has a 100 per cent guarantee that you will get your money back.
In forex, there is a concept called strategy, where certain scenarios will recur several times.
As a trader, you need to master these repetitions, which will enable you gain more.
In gambling however, you cannot predict the outcome of, say, a football match, even where odds are provided.
When you lose, you lose all your money. There are no strategies in gambling.
Has the recent government crackdown on forex businesses affected you?
I’m strictly a trader. The people being taken into custody are account managers who operate without licences.
My business does not hold money for other traders. To do that, you need to obtain a licence from the Capital Markets Authority, and some account managers overlook this. A trader only needs to pay your taxes, and be prudent.
Additional tips by myNetwork